HQ 556788: Reconsideration of HRL 556636; Eligibility of book straps for duty-free treatment under the GSP; 12.130; "product of"; substantial transformation

Native CBP ruling rendition. Applicability is fact-specific; modification/revocation relationships and original publisher date are retained. Publisher sentinel year0001 means unknown date, not a historical legal adoption.

                            HQ 556788

                        October 22, 1992

CLA-2 CO:R:C:S  556788  WAW

CATEGORY:  Classification

Mr. Victor Escamilla
Vicman Enterprises
3522 Avenue S
Galveston, TX  77550

RE:  Reconsideration of HRL 556636; Eligibility of book straps   
for duty-free treatment under the GSP; 12.130; "product of";
     substantial transformation

Dear Mr. Escamilla:

     This is in response to your letter of June 16, 1992,
requesting a partial reconsideration of Headquarters Ruling Letter
(HRL) 556636 dated May 30, 1992, concerning the eligibility of book
straps from Mexico for duty-free treatment under the Generalized
System of Preferences (GSP) (19 U.S.C. 2461-2466).  We held in HRL
556636 that the materials imported into Mexico were not subjected
to a substantial transformation to render the article a "product
of" Mexico and, therefore, the book straps were not eligible for
duty-free treatment under the GSP.

FACTS:

     In your recent submission, you state that you have made
arrangements to have approximately 90 percent of the foreign
materials cut to specifications in Mexico, rather than in the U.S. 
You have asked us to determine whether, under the present facts,
the book straps will qualify for duty-free treatment under the GSP.

     The following is a list of the materials which are exported
to Mexico and used in the production of the book straps:

     (a) polypropylene strips measuring .125 by 1.00 by 5.75
     inches;
     (b) poly bags measuring 7 by 23 inches;
     (c) 3/8 inch bias tape;
     (d) texacro hook and loop which will be cut to specifications
     in Mexico;
     (e) two inch elastic 100 percent stretch which will be cut to
     specifications in Mexico;
     (f) polypropylene webbing measuring 1 by 1 1/2 inches which
     is cut to specifications in Mexico;
     (g) 16 mil vinyl which is cut to specifications in Mexico;
     (h) 1 inch nickel-plated D rings, 1/2 inch nickel-plated
     slide; 1 1/2 inch nickel-plated snap;
     (i) header card measuring 12 by 7 1/2 inches which is attached
     to the poly bag;
     (j) cardboard box for shipping;
     (k) nylon sew on tags measuring 3/4 by 3/4 inches and 1 by 2
     inches;
     (l) cotton/poly blend multi color cover material which will
     be cut to specification in Mexico;
     (m) nylon thread.

     In Mexico, all of the above components are assembled to create
the Vicman "Strap-It Book Strap."  The 16 mil vinyl component will
act as the base materials for the strap which will measure 6 by 36
inches.  The texacro hook and loop will be attached to the vinyl
16 mil component.  The cotton/poly blend multi color cover material
will be attached to the 16 mil vinyl component.  Bias tape will
cover the outside perimeter of the strap and pockets.  The 2 inch
elastic component will be attached close to the pocket.  The 1 inch
polypropylene webbing will be assembled with the D ring to serve
as a handle.  The polypropylene webbing measuring 1 1/2 inches will
be assembled with the snap and slide to create the shoulder
assembly.  The polypropylene strips measuring .125 by 1 by 5.75
inches will serve to stiffen the handle.  The name tags will be
sewn on at the small pocket and a larger tag will be sewn on the
back of the 16 mil vinyl component.  The completed article will be
packaged in the poly bag and stapled together with the header card. 
The bagged article will then be packaged in a cardboard box and
shipped to the U.S. for distribution.

     You state that the book straps are comprised of approximately
15 components.  The cost of assembling the book straps in Mexico
constitutes approximately 90 percent of the total cost of the
product.

ISSUE:

     Whether the book straps are entitled to duty-free treatment
under the GSP.

LAW AND ANALYSIS:

     Under the GSP, eligible articles the growth, product, or
manufacture of a designated beneficiary developing country (BDC),
which are imported directly into the customs territory of the U.S.
from a BDC may receive duty-free treatment if the sum of (1) the
cost or value of materials produced in the BDC, plus (2) the direct
costs involved in processing the eligible article in the BDC, is
equivalent to at least 35% of the appraised value of the article
upon its entry into the U.S.  19 U.S.C. 2463(b).

     According to General Note 3(c)(ii)(A), HTSUS, Mexico is a BDC. 
In addition, based on the information provided, we believe that the
merchandise is classified in subheading 6307.90.94, HTSUS, which
provides for "Other made up articles, including dress patterns:
Other: Other," and are dutiable at 7 percent ad valorem.  Articles
classified under this provision are eligible for duty-free
treatment under the GSP provided they meet the "product of", 35%
value-content minimum and "imported directly" requirements.

     To comply with the requirements of the GSP statute, we must
first determine whether the bolts of fabric material imported into
Mexico become a product or manufacture of that country by being
substantially transformed there.  The courts have held that a
"substantial transformation" occurs "when an article emerges from
a manufacturing process with a name, character, or use which
differs from those of the original material subjected to the
process."  See The Torrington Co. v. United States, 764 F.2d 1563
(Fed. Cir. 1985).

     Because the subject merchandise consists, in large part, of
textile materials, section 12.130, Customs Regulations (19 CFR
12.130), is applicable.  Section 12.130, Customs Regulations (19
CFR 12.130), sets forth criteria for determining whether a textile
or textile product has been substantially transformed.  Pursuant
to the regulations, a textile or textile product will be considered
to have undergone a substantial transformation if it has been
transformed by means of substantial manufacturing or processing
operations into a new and different article of commerce.  See 19
CFR 12.130(b).  According to section 12.130(d)(2), the following
will be considered in determining whether merchandise has been
subjected to substantial manufacturing or processing operations: 
(1) the physical change in the material or article; (2) the time
involved; (3) the complexity of the operations; (4) the level or
degree of skill and/or technology required; and (5) the value added
to the article in each country or territory.  Any one or a
combination of these factors may be determinative and other factors
may also be considered.  19 CFR 12.130(d).  

     Examples of processes which generally will result in a
substantial transformation and those which usually will not are
set forth in 19 CFR 12.130(e).  According to 19 CFR 12.130(e)(iv),
the cutting of fabric into parts and the assembly of those parts
into the completed article in a foreign country or insular
possession will usually result in a substantial transformation of
the fabric so as to confer country of origin.  In this case, the
cutting of the U.S.-origin fabric and other materials into various
shapes and sizes suitable for use as components for a book straps,
and the assembly of those parts to produce the book straps in
Mexico, result in a substantial transformation of the imported
materials.  Therefore, the book straps are considered "products of"
Mexico for purposes of the GSP and will be entitled to duty-free
treatment, provided the imported directly and 35% value-content
requirements are satisfied.

HOLDING:

     Based on the information provided, we find that the cutting
of the U.S.-origin fabric and other materials into various shapes
and sizes suitable for use as components for book straps, and the
subsequent assembly of these parts into finished book straps in
Mexico result in a substantial transformation of the imported
materials into "products of" Mexico.  Therefore, the book straps
may be eligible for duty-free treatment, provided the GSP 35%
value-content requirement is satisfied, and the merchandise is
imported directly into the U.S.

                                   Sincerely,




                                   John Durant, Director
                                   Commercial Rulings Division